Ordering Decision Of Two Competing Retailers When Selling To Strategic Consumers

In this paper, we develop a model that each of two competing retailers on Hotellingline maximizes his own profit by ordering decision when selling same kind of productsto strategic consumers. Facing declining prices over two selling periods, all theconsumers on Hotelling line have the same risk preference and know the price and fillrate of each retailer in each period. Consumers decide their buying strategy bycomparing the expect utilities of purchasing from different retailers in different periods.Because strategic consumers prefer waiting to purchase items at a discount price, theretailers may choose capacity rationing strategy to induce more consumers to purchaseearly at the high price. We analyze the optimal ordering decisions for retailers. Whentwo retailers are symmetric, they have same optimal decisions; when they areasymmetric, their optimal ordering decisions could be different. Under appropriateconditions, if there are a large number of high-value consumers for a retailer, it isoptimal for this retailer to create rationing risk and sell in two periods; otherwise theretailer should serve his entire market at the low price. Besides, if two retailers havedifferent optimal decisions, the retailer who originally occupies a larger market sharewould create rationing risk and sell in two periods, while his market share is reduced.